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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________to_________________
Commission File Number 0-3400
TYSON FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0225165
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2210 West Oaklawn Drive, Springdale, Arkansas 72762-6999
(Address of principal executive offices and zip code)
(501) 290-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding March 28, 1998
- ------------------------------------ --------------------------
Class A Common Stock, $.10 Par Value 128,749,411 Shares
Class B Common Stock, $.10 Par Value 102,645,513 Shares
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TYSON FOODS, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 28, 1998 and September 27, 1997 3
Consolidated Condensed Statements of Income
for the Three Months and Six Months Ended
March 28, 1998 and March 29, 1997 4
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended
March 28, 1998 and March 29, 1997 5
Notes to Consolidated Condensed Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
Item 3. Quantitative and Qualitative Disclosure About
Market Risks 13-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17-18
SIGNATURES 19
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions except per share amounts)
(Unaudited)
March 28, September 27,
ASSETS 1998 1997
Current Assets:
Cash and cash equivalents $34.4 $23.6
Accounts receivable 769.9 617.8
Inventories 1,151.6 886.1
Assets held for sale 125.2 6.2
Other current assets 53.8 38.8
_______ _______
Total Current Assets 2,134.9 1,572.5
Net Property, Plant, and Equipment 2,389.5 1,924.8
Excess of Investments over Net Assets Acquired 1,032.2 731.1
Investments and Other Assets 238.2 182.6
________ ________
Total Assets $5,794.8 $4,411.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $56.3 $37.3
Current portion of long-term debt 57.9 94.6
Trade accounts payable 342.6 290.3
Other accrued liabilities 467.4 298.8
_______ _______
Total Current Liabilities 924.2 721.0
Long-Term Debt 2,249.9 1,558.2
Deferred Income Taxes 553.1 506.1
Other Liabilities 33.6 4.2
Shareholders' Equity:
Common stock ($.10 par value):
Class A-Authorized 900 million shares;
issued 138.0 million shares at 3-28-98
and 119.5 million shares at 9-27-97 13.8 11.9
Class B-Authorized 900 million shares;
issued 102.6 million shares at 3-28-98
and 102.7 million shares at 9-27-97 10.3 10.3
Capital in excess of par value 740.7 379.1
Retained earnings 1,448.3 1,390.8
Currency translation adjustment (2.1) (2.5)
_______ _______
2,211.0 1,789.6
Less treasury stock, at cost-
9.2 million shares at 3-28-98 and
8.8 million shares at 9-27-97 174.7 165.6
Less unamortized deferred compensation 2.3 2.5
________ ________
Total Shareholders' Equity 2,034.0 1,621.5
________ ________
Total Liabilities and Shareholders' Equity $5,794.8 $4,411.0
======== ========
The accompanying notes are an integral part of these financial statements.
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TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions except per share data)
(Unaudited)
Three Months Ended Six Months Ended
__________________ ________________
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
________ ________ ________ ________
Sales $1,870.8 $1,574.3 $3,391.6 $3,102.2
Cost of Sales 1,602.0 1,312.1 2,862.1 2,591.6
------- ------- ------- -------
Gross Profit 268.8 262.2 529.5 510.6
Expenses:
Selling 155.2 125.2 280.8 250.3
General and administrative 33.6 25.3 64.9 48.8
Amortization 8.3 6.9 14.2 13.7
------- ------- ------- -------
Operating Income 71.7 104.8 169.6 197.8
Other Expense (Income):
Interest 38.0 26.2 65.2 55.1
Other (3.2) 2.1 (3.8) (39.4)
------- ------- ------- -------
Income Before Taxes on Income 36.9 76.5 108.2 182.1
Provision for Income Taxes 13.6 28.3 40.0 89.3
------- ------- ------- -------
Net Income $23.3 $48.2 $68.2 $92.8
======= ======= ======= =======
Basic Average
Shares Outstanding 231.5 216.9 222.4 217.2
===== ===== ===== =====
Basic Earnings Per Share $0.10 $0.22 $0.31 $0.43
===== ===== ===== =====
Diluted Average
Shares Outstanding 232.4 219.0 223.4 219.2
===== ===== ===== =====
Diluted Earnings Per Share $0.10 $0.22 $0.31 $0.42
===== ===== ===== =====
Cash Dividends Per Share:
Class A $0.0250 $0.0250 $0.0500 $0.0450
Class B $0.0225 $0.0225 $0.0450 $0.0405
The accompanying notes are an integral part of these financial statements.
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TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
________________
March 28, March 29,
1998 1997
_________ _________
Cash Flows from Operating Activities:
Net income $68.2 $92.8
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 114.0 101.5
Amortization 14.2 13.7
Deferred income taxes (23.9) (3.7)
Gain on dispositions of assets (4.0) (39.0)
(Increase)decrease in accounts receivable (48.3) 39.6
Increase in inventories (56.2) (7.9)
Increase in trade accounts payable 1.6 8.2
Net change in other current assets
and liabilities 88.9 47.9
_____ ______
Cash Provided by Operating Activities 154.5 253.1
Cash Flows from Investing Activities:
Net cash paid for acquisitions (257.4)
Additions to property, plant and equipment (150.5) (121.9)
Proceeds from sale of property, plant and equipment 12.1 189.1
Net change in other assets and liabilities (23.1) (36.9)
_____ ______
Cash (Used for)Provided by Investing Activities (418.9) 30.3
Cash Flows from Financing Activities:
Net change in notes payable (66.0) (38.5)
Proceeds from long-term debt 780.2 79.4
Repayments of long-term debt (419.6) (226.4)
Purchases of treasury shares (9.8) (25.8)
Other (9.4) (8.5)
_____ ______
Cash Provided by (Used for) Financing Activities 275.4 (219.8)
Effect of Exchange Rate Change on Cash (0.2) 0.2
_____ ______
Increase in Cash and Cash Equivalents 10.8 63.8
Cash and Cash Equivalents at Beginning of Period 23.6 36.6
______ ______
Cash and Cash Equivalents at End of Period $34.4 $100.4
====== ======
Supplemental Cash Flow Information
Cash paid during the period for:
Interest $67.2 $64.4
Income taxes $26.8 $72.4
The accompanying notes are an integral part of these financial statements.
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TYSON FOODS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
The consolidated condensed financial statements have been prepared by Tyson
Foods, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the management of the Company believes that the
disclosures are adequate to make the information presented not misleading,
these consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report for the fiscal year ended
September 27, 1997. The preparation of consolidated condensed financial
statements requires management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates. In the opinion of the management of the
Company, the accompanying consolidated condensed financial statements
contain all adjustments, consisting of normal recurring accruals necessary
to present fairly the financial position as of March 28, 1998 and
September 27, 1997 and the results of operations for the three and six
months ended March 28, 1998 and March 29, 1997, and cash flows for the six
months ended March 28, 1998 and March 29, 1997. The results of operations
for the three and six months ended March 28, 1998 and March 29, 1997, and
cash flows for the six months ended March 28, 1998 and March 29, 1997, are
not necessarily indicative of the results to be expected for the full year.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Statement 128
replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings
per share, basic earnings per share excludes the dilutive effects of
options, warrants, and convertible securities. Diluted earnings per share
is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented,
and where necessary, restated to conform to the Statement 128 requirements.
The Notes to Consolidated Financial Statements for the fiscal year
ended September 27, 1997, reflect the significant accounting policies, debt
provisions, borrowing arrangements, dividend restrictions, contingencies
and commitments of the Company. There were no material changes in such
items during the six months ended March 28, 1998, except as disclosed in
these notes.
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2. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the three and six months ended:
(In millions)
Three Months Ended Six Months Ended
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
-------- -------- -------- --------
Numerator:
Net Income $23.3 $48.2 $68.2 $92.8
===== ===== ===== =====
Denominator:
Denominator for basic
earnings per share-
weighted average shares 231.5 216.9 222.4 217.2
Effect of dilutive securities:
Employee stock options 0.9 2.1 1.0 2.0
----- ----- ----- -----
Denominator for diluted
earnings per share-
adjusted weighted average
shares and assumed conversions 232.4 219.0 223.4 219.2
===== ===== ===== =====
Basic earnings per share $0.10 $0.22 $0.31 $0.43
===== ===== ===== =====
Diluted earnings per share $0.10 $0.22 $0.31 $0.42
===== ===== ===== =====
3. Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market,
consist of the following:
(In millions)
March 28, September 27,
1998 1997
--------- ------------
Finished and work-in-process $ 526.5 $366.1
Live poultry and hogs 413.6 353.4
Seafood related products 49.5 39.5
Hatchery eggs and feed 80.7 57.8
Supplies 81.3 69.3
________ ______
Total $1,151.6 $886.1
======== ======
4. Acquisitions and Dispositions
On January 9, 1998, the Company completed the acquisition of Hudson Foods,
Inc. ("Hudson") pursuant to which Hudson merged with and into a wholly-
owned subsidiary of the Company (the "Hudson Acquisition"). At the
effective time of merger the Class A and Class B shareholders of Hudson
received an aggregate of approximately 18.4 million shares of the Company's
Class A common stock and approximately $257.4 million in cash. On
January 9, 1998, the Company borrowed $318 million under its commercial
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paper program to finance the $257.4 million cash portion of the
Hudson Acquisition and repay approximately $61 million under Hudson's
revolving credit facilities. Reference is made to the Company's Current
Report on Form 8-K, dated January 15, 1998 for a more detailed description
of Hudson and the Hudson Acquisition, including certain pro forma financial
information giving effect to the Hudson Acquisition. The Hudson Acquisition
has been accounted for as a purchase and the excess of investment over net
assets acquired is being amortized straight-line over forty years. The
Company's consolidated results of operations include the operations of
Hudson since the acquisition date. The following unaudited pro forma
information shows the results of operations as though the purchase of
Hudson had been made at the beginning of fiscal 1997.
(In millions, except per share data)
Six Months Ended
March 28, March 29,
1998 1997
--------------------------
Net sales $3,808.5 $3,898.6
Net income 60.4 97.5
Basic Earnings Per Share 0.26 0.41
Diluted Earnings Per Share 0.26 0.41
The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the purchase
actually been made at the beginning of 1997, or the results which may occur
in the future.
On April 10, 1998, Hudson, a wholly owned subsidiary of the Company, and
Fresh Foods of North Carolina, LLC ("Fresh Foods"), a wholly owned
subsidiary of WSMP, Inc., signed a definitive asset purchase agreement for
Fresh Foods to acquire the core business of Pierre Foods from Hudson.
Pierre Foods, based in Cincinnati, Ohio and part of the Hudson Acquisition,
is primarily engaged in producing and distributing packaged, precooked food
products to the foodservice industry. The terms of the purchase agreement
call for WSMP to pay $122 million in cash and to assume Pierre Foods'
liabilities. The transaction is expected to be finalized by mid-June. The
related net assets of Pierre Foods have been classified as "assets held for
sale" in the Consolidated Condensed Balance Sheets.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
For the six months ended March 28, 1998, net cash totaling $154.5 million
was provided by all operating activities. Operations provided $168.5
million in cash and $14.0 million was used by net changes in receivables,
inventories, payables and other items. The Company used cash from
operations to fund $150.5 million of property, plant and equipment
additions. The expenditures for property, plant and equipment were related
to acquiring new equipment, upgrading facilities in order to maintain
competitive standing and position the Company for future opportunities.
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At March 28, 1998, working capital was $1,210.7 million compared to $851.5
million at 1997 fiscal year-end, an increase of $359.2 million. The
current ratio at March 28, 1998 was 2.3 to 1 compared to 2.2 to 1 at
September 27, 1997. Working capital has increased since year-end primarily
due to increases in accounts receivable, inventories and assets held for
sale, offset slightly by an increase in notes payable, accounts payable
and other current liabilities primarily due to the Hudson Acquisition. The
increase in assets held for sale consists of Pierre Foods' core business
net assets (See Note 4 of Notes to Consolidated Condensed Financial
Statements). At March 28, 1998, total debt was 53.8% of total
capitalization compared to 51.0% at September 27, 1997. The Company's
foreseeable cash needs for operations and capital expenditures will
continue to be met through cash flows from operations and borrowings
supported by existing credit facilities as well as additional credit
facilities which the Company believes are available.
The Company has an unsecured revolving credit agreement totaling $1 billion
which supports the Company's commercial paper program. This $1 billion
facility expires in May 2002. At March 28, 1998, $981.6 million was
outstanding under this $1 billion facility consisting of $812.6 million in
commercial paper and $169.0 million drawn under the revolver. The Company's
$250 million facility was terminated effective May 4, 1998. Additional
outstanding long-term debt at March 28, 1998 consisted of $790.6 million of
public debt, $221.6 million of institutional notes, $181.9 million in
leveraged equipment loans and $74.2 million of other indebtedness. On
January 9, 1998, the Company borrowed approximately $318 million under its
commercial paper program, the proceeds of which were used to (i) finance
the $257.4 million cash portion of the Hudson Acquisition and (ii) repay
approximately $61 million under Hudson's revolving credit facilities.
Subsequent to the Hudson Acquisition, the Company refinanced $269.7 million
in outstanding long-term debt assumed pursuant to the Hudson Acquisition
with commercial paper. On January 21, 1998 the Company issued, in two
separate series, $150 million 6% Notes due January 15, 2003 and $150
million 7% Notes due January 15, 2028. On February 4, 1998, the Company
issued $100 million 6.08% Mandatory Par Put Remarketed SecuritiesSM
("MOPPRSSM") due February 1, 2010 and $50 million Floating Rate MOPPRSSM
due February 1, 2010. On April 28, 1998, the Company issued debt securities
in the form of $240 million 7% Notes due May 1, 2018. The net proceeds from
these debt offerings were used by the Company to repay a portion of the
borrowings under its commercial paper program. The Company may use funds
borrowed under its revolving credit facilities, commercial paper program
or through the issuance of additional debt securities from time to time in
the future to repay additional indebtedness of Hudson assumed by the
Company as a result of the Hudson Acquisition, to finance acquisitions as
opportunities may arise, to refinance other indebtedness or capital leases
of the Company, and for other general corporate purposes.
RESULTS OF OPERATIONS
The operating results for the second quarter of fiscal 1998 were impacted
by the excess supply of all meat proteins, weakness in the export markets
and the quality of the Hudson Foods sales mix the Company inherited. Sales
for the second quarter of fiscal 1998 increased 18.8% from the same quarter
of fiscal 1997. This increase is mainly due to a 27.3% increase in total
volume partially offset by a 6.7% decrease in average sales prices.
Consumer poultry sales, excluding turkey, accounted for an increase of
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12.8% of the total change in sales for the second quarter of fiscal 1998 as
compared to the same quarter of fiscal 1997. This increase was due to a
31.8% increase in tonnage offset by a 12.4% decrease in average sales
prices. A significant portion of the increase in total sales and consumer
poultry sales for the second quarter of fiscal 1998 compared to the second
quarter of fiscal 1997 is due to the Hudson Acquisition.
Mexican Original, Culinary Foods and Mallards Food sales as a group
accounted for an increase of 0.7% of the total change in sales for the
second quarter of fiscal 1998 as compared to the same quarter of fiscal
1997. This increase was primarily due to a 17.7% increase in average sales
prices and a 4.1% increase in tonnage, largely due to the acquisition of
Mallards Food in August 1997. Seafood sales accounted for a decrease of
1.8% of the change in total sales for the second quarter of fiscal 1998 as
compared to the same quarter of fiscal 1997. This decrease was due to a
34.7% decrease in tonnage slightly offset by a 0.1% increase in average
sales prices. The seafood operations continue to be affected by the
availability of some species of fish as well as reduced pricing on some
products and other regulations which limit its source of supply. Sales of
Hudson's Pierre Foods, turkey and miscellaneous as a group accounted for an
increase of 6.2% of the change in total sales for the second quarter of
fiscal 1998 as compared to the same quarter of fiscal 1997. Sales of live
swine, animal foods, by-products, and other, as a group accounted for an
increase of 0.9% of the change in total sales for the second quarter of
fiscal 1998 as compared to the same quarter of fiscal 1997.
Sales for the first six months of fiscal 1998 increased 9.3% over the same
period of fiscal 1997. This increase was largely due to consumer poultry
sales, excluding turkey, which accounted for an increase of 5.9% of the
change in total sales for the first six months of fiscal 1998 as compared
to the same period of fiscal 1997. This increase in consumer poultry sales
was primarily due to an increase in tonnage of 19.0% offset somewhat by a
decrease in average sales prices of 10.0%. A significant portion of the
increase in total sales and consumer poultry sales for the first six months
of fiscal 1998 compared to the same period of fiscal 1997 is due to the
Hudson Acquisition.
Mexican Original, Culinary Foods and Mallards Food sales as a group
accounted for an increase of 0.6% of the change in total sales for the
first six months of fiscal 1998 as compared to the same period of fiscal
1997. This increase was primarily due to a 16.1% increase in average sales
prices as well as a 0.6% increase in tonnage, largely due to the
acquisition of Mallards Food in August 1997. Seafood sales accounted for a
decrease of 1.3% of the change in total sales for the first six months of
fiscal 1998 as compared to the same period of fiscal 1997. This decrease
was due to a 32.7% decrease in tonnage partially offset by a 5.3% increase
in average sales prices. Sales of Hudson's Pierre Foods, turkey and
miscellaneous as a group accounted for an increase of 3.1% of the change in
total sales for the first six months of fiscal 1998 as compared to the same
period of last year. Sales of live swine, animal foods, by-products, and
other as a group accounted for an increase of 1.0% of the change in total
sales for the first six months of fiscal 1998 as compared to the same
period of last year.
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The Company recognizes that conducting business in or selling products into
foreign countries, including but not limited to Russia and certain Asian
countries, entails inherent risks including various political, credit,
inventory and currency risks. The Company, however, is continually
monitoring its international business practices and, whenever possible,
will attempt to minimize the Company's financial exposure to these risks.
Cost of goods sold increased 22.1% for the second quarter of fiscal 1998 as
compared to the same quarter of fiscal 1997. This increase is mainly the
result of the increase in sales. The cost of ingredients used in feed for
poultry and swine and the ingredients used in Mexican Original operations
during the second quarter of fiscal 1998 decreased in comparison with the
same quarter of fiscal 1997. As a percent of sales, cost of sales was 85.6%
for the second quarter of fiscal 1998 compared to 83.3% in the second
quarter of fiscal 1997.
Cost of goods sold increased 10.4% for the first six months of fiscal 1998
compared to the same period of fiscal 1997. This increase is mainly the
result of the increase in sales. As a percent of sales, cost of sales
was 84.4% for the first six months of fiscal 1998 compared to 83.5% in the
same period of fiscal 1997.
Operating expenses increased 25.2% for the second quarter of fiscal 1998
over the same quarter of fiscal 1997 mostly due to the Hudson Acquisition.
Selling expense, as a percent of sales, increased to 8.3% for the second
quarter of fiscal 1998 as compared to 8.0% for the second quarter of fiscal
1997. General and administrative expense, as a percent of sales, was 1.8%
in the second quarter of fiscal 1998 compared to 1.6% in the same period
last year. Amortization expense, as a percent of sales, was 0.4% in the
second quarter of fiscal 1998 and 1997.
Operating expenses increased 15.1% for the first six months of fiscal 1998
from the same period of fiscal 1997 mostly due to the Hudson Acquisition.
Selling expense, as a percent of sales, increased to 8.3% for the first six
months of fiscal 1998 as compared to 8.1% for the same period of fiscal
1997. General and administrative expense, as a percent of sales, was 1.9%
in the first six months of fiscal 1998 compared to 1.6% in the same period
last year. Included in general and administrative expense for the first six
months of fiscal 1998 is a charge of $6 million for penalties and costs
associated with the plea agreement by the Company with respect to the
investigation by the Office of Independent Counsel in connection with
former Secretary of Agriculture Michael Espy. (See Part II. Item 1- Legal
Proceedings.) Amortization expense, as a percent of sales, was 0.4% in the
first six months of fiscal 1998 and 1997.
Interest expense increased 45.0% for the second quarter of fiscal 1998
compared to the same quarter of fiscal 1997 primarily as a result of a
28.4% increase in the Company's average indebtedness over the same period
last year. The weighted average interest rate of all Company debt
increased to 6.7% compared to 5.9% for the same period last year.
Interest expense increased 18.3% in the first six months of fiscal 1998
compared to the same period of fiscal 1997. The Company had a higher level
of borrowing which increased the Company's average indebtedness by 8.8%
from the same period last year. The weighted average interest rate of all
Company debt increased to 6.6% compared to 6.0% for the same period last
year.
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The effective income tax rate for the second quarter and first six months
of fiscal 1998 was 36.9% and 37.0%, respectively compared to 37.0% and
49.0% for the same periods of fiscal 1997. The first six months of fiscal
1997 effective tax rate was impacted by the taxes on the gain from the sale
of the beef division assets. Certain costs were allocated to the beef
division which are not deductible for tax purposes, resulting in a higher
effective tax rate.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace limited portions of its software so that its
computer systems will function properly with respect to dates in the year
2000 and thereafter. The Company presently believes that with modifications
to existing software and conversions to new software, the Year 2000 Issue
will not pose significant operational problems for its computer systems.
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure
to remediate their own Year 2000 Issues. The Company's total Year 2000
project cost and estimates to complete include the estimated costs and time
associated with the impact of third party Year 2000 Issues based upon
presently available information. However, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company's
systems.
The Company will utilize both internal and external resources to reprogram,
or replace, and test the software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project by December 31, 1998, which is
prior to any anticipated impact on its operating systems. The total cost of
the Year 2000 project is not expected to have a material effect on the
Company's results of operations.
ENVIRONMENTAL MATTERS
The Company has a strong financial commitment to environmental matters.
During the first six months of fiscal 1998 the Company invested
approximately $20.2 million in water quality facilities, including capital
outlays to build and upgrade facilities and day-to-day operations of waste-
water facilities.
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CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE
PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
The Company and its representatives may from time to time make written or
oral forward-looking statements with respect to their current views and
estimates of future economic circumstances, industry conditions, company
performance and financial results. These forward-looking statements are
subject to a number of factors and uncertainties, including those related
to the Company's ability to effectively assimilate Hudson, which could
cause the Company's actual results and experiences to differ materially
from the anticipated results and expectations, expressed in such forward-
looking statements. The Company wishes to caution readers not to place
undue reliance on any forward-looking statements, which speak only as of
the date made. Among the factors that may affect the operating results of
the Company are the following: (i) fluctuations in the cost and
availability of raw materials, such as feed grain costs in relation to
historical levels; (ii) changes in the availability and relative costs of
labor and contract growers; (iii) market conditions for finished products,
including the supply and pricing of alternative proteins, all of which may
impact the Company's pricing power; (iv) effectiveness of advertising and
marketing programs; (v) the ability of the Company to make effective
acquisitions and successfully integrate newly acquired businesses,
including Hudson, into existing operations; (vi) risks associated with
leverage, including cost increases due to rising interest rates; (vii)
changes in regulations and laws, including changes in accounting standards,
environmental laws, occupational, health and safety laws, and laws
regulating fishing and seafood processing activities; (viii) access to
foreign markets together with foreign economic conditions, including
currency fluctuations; and (ix) the effect of, or changes in, general
economic conditions.
Item 3. Quantitative and Qualitative Disclosure About Market Risks
Market risks relating to the Company's operations result primarily from
changes in interest rates, foreign exchange rates and commodity prices,
as well as credit risk concentrations. To address these risks the Company
enters into various hedging transactions as described below. The Company
does not use financial instruments for trading purposes and is not a party
to any leveraged derivatives.
Foreign Currency and Interest Rate Risks
The Company periodically enters into foreign exchange forward contracts
and option contracts to hedge some of its foreign currency exposure.
The Company uses such contracts to hedge exposure to changes in foreign
currency exchange rates, primarily Japanese yen, associated with sales
denominated in foreign currency. Gains and losses on these contracts are
deferred and recognized as an adjustment of the subsequent transaction
when it occurs. Forward and option contracts generally have maturities not
exceeding twelve months.
The Company also hedges exposure to changes in interest rates on certain
ofits financial instruments. Under the terms of various leveraged equipment
loans, the Company enters into interest rate swap agreements to effectively
lock in a fixed interest rate for these borrowings. The maturity dates
of these leveraged equipment loans range from 2005 to 2008 with interest
rates ranging from 4.7% to 6.0%.
13
<PAGE>
As of March 28, 1998, the stated or notional amounts of the Company's
outstanding foreign currency and interest rate derivative financial
instruments were as follows:
(In millions)
- ------------------------------------------------------------------
March 28,
1998
- ------------------------------------------------------------------
Interest rate swaps $150.3
Foreign currency purchased options to sell 33.6
Foreign currency sold options to sell 37.9
==================================================================
The following table provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. The table presents the Company's debt
obligations, principal cash flows and related weighted-average interest
rates by expected maturity dates. For interest rate swaps, the table
presents notional amounts and weighted-average interest rates or strike
rates by contractual maturity dates. Notional amounts are used to calculate
the contractual cash flows to be exchanged under the contract.
Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
___________________________________________________________________________
(dollars in millions)1998 1999 2000 2001 2002 There- Total Fair
after Value
3/28/98
___________________________________________________________________________
Liabilities
Long-term Debt, including Current Portion
Fixed Rate $57.9 $227.9 $128.1 $74.6 $177.8 $605.9 $1,272.2 $1,272.2
Average Interest
Rate 8.98% 6.28% 8.59% 9.46% 6.20% 6.75% 7.36%
Variable Rate - - - - $981.6 $54.0 $1,035.6 $1,035.6
Average Interest
Rate - - - - 5.72% 3.87% 5.62%
Interest Rate Derivative Financial Instruments Related to Debt
Interest Rate Swaps
Pay Fixed $7.2 $16.0 $17.2 $18.4 $19.6 $71.9 $150.3 $3.6
Average Pay Rate 6.60% 6.71% 6.71% 6.69% 6.73% 6.63%
Average Receive Rate- USD 6 Month Libor.
===========================================================================
The following table summarizes information on instruments and transactions
that are sensitive to foreign currency exchange rates, including foreign
currency forward exchange agreements. For foreign currency forward exchange
agreements, the table presents the notional amounts and weighted-average
exchange rates by expected (contractual) maturity dates. These notional
amounts generally are used to calculate the contractual payments to be
exchanged under the contract.
14
<PAGE>
Exposures Related to Derivative Contracts
with United States Dollar Functional Currency
Principal (Notional) Amount by Expected Maturity
Average Forward Foreign Currency Exchange Rate (USD/Foreign Currency)
(dollars in millions)
___________________________________________________________________________
1998 1999 2000 2001 2002 There- Total Fair
after Value
3/28/98
___________________________________________________________________________
Sold Option Contracts to Sell Foreign Currencies for US$
Japanese Yen
Notional Amount $31.4 $ 6.5 - - - - $37.9 $ 0
Weighted Average
Strike Price 113.03 109.48 - - - - - -
Purchased Option Contracts to Sell Foreign Currencies for US$
Japanese Yen
Notional Amount $ 28.0 $ 5.6 - - - - $33.6 $1.6
Weighted Average
Strike Price 126.84 126.69 - - - - - -
============================================================================
Commodities Risk
The Company is a purchaser of certain commodities, primarily corn and
soybeans. The Company uses commodity futures and purchased options for
hedging purposes to reduce the effect of changing commodity prices on a
portion of its commodity purchases. The contracts that effectively meet
risk reductions and correlation criteria are recorded using hedge
accounting. Gains and losses on hedge transactions are recorded as a
component of the underlying inventory purchase.
The following table provides information about the Company's corn, soybean
meal and other feed ingredient inventory and futures contracts that are
sensitive to changes in commodity prices. For inventory, the table presents
the carrying amount and fair value at March 28, 1998. For the futures
contracts the table presents the notional amounts in bushels, the weighted
average contract prices, and the total dollar contract amount by expected
maturity dates, the latest of which occurs four months from the reporting
date. Contract amounts are used to calculate the contractual payments and
quantity of corn and soybean meal to be exchanged under the futures
contracts.
- ---------------------------------------------------------------------------
(In millions) Carrying amount Fair value
- ---------------------------------------------------------------------------
On Balance Sheet Commodity Position
and Related Derivatives
Corn, Soybean Meal and Other Feed
Ingredient Inventory $ 39.7 $ 39.7
Corn Futures Contracts
Contract Volumes
(bushels) 3,130,000 -
Weighted Average Price
(Per bushel) $ 2.69 -
Contract Amount
($US in millions) $ 8.4 $ 8.1
==========================================================================
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 22, 1997, the Company entered into a plea agreement ("Plea
Agreement") with the United States whereby the Company agreed to plead
guilty to one (1) count of Gratuity to a Public Official in violation of 18
U.S.C. 201(c)(1)(A). Pursuant to said Plea Agreement, the Company agreed
to (i) pay a fine of Four Million and No/100 Dollars ($4,000,000.00), (ii)
pay Two Million and No/100 Dollars ($2,000,000.00) to be applied to the
costs of the investigation of the Office of the Independent Counsel
("OIC"), and (iii) enter into a Compliance Agreement among the Company, the
United States Department of Agriculture ("USDA") and the OIC. The USDA, as
the lead agency for purposes of suspension and debarment, has determined
that the terms and conditions of the Plea Agreement provide adequate
assurance that the Company's future dealings with the federal government
will be conducted with the high degree of integrity that the federal
government expects of its business partners and that suspension, debarment,
or action under the Federal Meat Inspection Act, the Poultry Products
Inspection Act, and the Agricultural Marketing Act of 1946 is not necessary
to protect its interests. On January 12, 1998 the United States District
Court for the District of Columbia entered judgement against the Company
enforcing the terms and conditions of the Plea Agreement and also placing
the Company on probation for a term of four (4) years.
On July 28, 1997, Hudson received notice from the United States Department
of Justice ("DOJ") that it was prepared to bring an action against Hudson
for the alleged violation of the Clean Water Act at Hudson's Berlin,
Maryland poultry processing facility. The DOJ alleged that over the past
five years, Hudson had repeatedly discharged pollutants in quantities in
excess of its National Pollutant Discharge Elimination System ("NPDES")
permit limits, violated monitoring and sampling requirements of its NPDES
permit and failed to provide notice of NPDES violations. On September 19,
1997, Hudson entered into an agreement in principle with the DOJ for the
settlement of these claims. On May 8, 1998, a Consent Decree between the
United States, Hudson and the Company was filed with the United States
District Court together with a Complaint alleging these violations. Upon
expiration of a thirty (30) day comment period, it is anticipated that the
District Court will approve and enter the Consent Decree, at which time the
Consent Decree will become effective. The Consent Decree, while stating
that Hudson denies the violations alleged in the Complaint, provides for
the payment to the United States of $4.0 million and the expenditure of
$2.0 million in supplemental environmental projects (SEP's).
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
16
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The following directors were elected at the annual meeting of shareholders
held January 9, 1998:
DIRECTORS VOTES FOR VOTES WITHHELD
_________ _________ ______________
Neely Cassady 1,116,580,621 1,065,743
Lloyd V. Hackley 1,116,586,506 1,059,858
Gerald M. Johnston 1,116,564,775 1,081,589
Shelby Massey 1,116,583,375 1,062,989
Joe F. Starr 1,098,077,490 19,568,874
Leland Tollett 1,116,564,870 1,081,494
Barbara Tyson 1,116,551,502 1,094,862
Don Tyson 1,116,549,525 1,096,839
John Tyson 1,116,538,276 1,108,088
Fred S. Vorsanger 1,116,580,921 1,065,443
Donald E. Wray 1,116,565,329 1,081,035
No other items were voted on at the annual meeting of shareholders or
during the quarter ended March 28, 1998.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits filed with this report are listed in the exhibit index at the
end of this Item 6.
(b) Reports on Form 8-K:
On January 5, 1998 and January 15, 1998, the Company filed Current Reports
on Form 8-K related to the definitive agreement and plan of merger with
Hudson Foods, Inc.
On January 27, 1998, the Company filed a Current Report on Form 8-K related
to the Company's First Quarter Fiscal 1998 Operating Results.
On February 4, 1998, the Company filed a Current Report on Form 8-K related
to Remarketing Agreements dated January 28, 1998 between the Company and
Merrill Lynch, Pierce, Fenner & Smith, Incorporated with respect to the
Company's issuance of $100 million of 6.08% MOPPRSSM due February 1, 2010
and $50 million of Floating Rate MOPPRSSM due February 1, 2010.
On April 27, 1998, the Company filed a Current Report on Form 8-K related
to the Company's Second Quarter and First Six Months of Fiscal 1998
Operating Results.
17
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with this report.
Exhibit No. Page
- ----------- ----
3.1 Certificate of Incorporation of the Company as amended
(previously filed as Exhibit 3(a) to the Company's
Registration Statement on Form S-4 filed with the
Commission on July 8, 1992, Commission File No. 33-49368,
and incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (previously
filed as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 28, 1996,
Commission File No. 0-3400, and incorporated herein by
reference).
4.1 Form of 7.0% $200 million Note due May 1, 2018 20-25
4.2 Form of 7.0% $40 million Note due May 1, 2018 26-31
12 Ratio of Earnings to Fixed Charges 32
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for the 3 months ended
December 28, 1996
27.3 Restated Financial Data Schedule for the 6 months ended
March 29, 1997
27.4 Restated Financial Data Schedule for the 9 months ended
June 28, 1997
27.5 Restated Financial Data Schedule for the 12 months ended
September 27, 1997
27.6 Restated Financial Data Schedule for the 12 months ended
September 28, 1996
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TYSON FOODS, INC.
Date: May 12,1998 /s/ Wayne Britt
----------- ----------------
Wayne Britt
Executive Vice President and
Chief Financial Officer
Date: May 12,1998 /s/ James G. Ennis
----------- ------------------
James G. Ennis
Vice President, Controller and
Chief Accounting Officer
19
<PAGE>
CUSIP: 902494 AF0
No. 1 $200,000,000
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the
Company or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
TYSON FOODS, INC.
7.00% Note due May 1, 2018
TYSON FOODS, INC., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Cede & Co. or registered
assigns, at the office or agency of the Company in The City of New York,
New York, the principal sum of $200,000,000 on May 1, 2018, in the coin or
currency of the United States, and to pay interest, semi-annually on May
1 and November 1 of each year, commencing November 1, 1998, on said
principal sum at said office or agency, in like coin or currency, at the
rate per annum specified in the title of this Note, from the May 1 or the
November 1, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date hereof
is a date to which interest has been paid or duly provided for, in which
case from the date of this Note, or unless no interest has been paid or
duly provided for on this Note, in which case from May 1, 1998, until
payment of said principal sum has been made or duly provided for; provided,
that payment of interest may be made at the option of the Company by check
mailed to the address of the person entitled thereto as such address shall
appear on the Security Register of the Company or by wire transfer as
provided in the Indenture. Notwithstanding the foregoing, if the date
hereof is after the 15th day of April or October, as the case may be, and
before the following May 1 or November 1, this Note shall bear interest
from such May 1 or November 1; provided, that if the Company shall default
in the payment of interest due on such May 1 or November 1, then this Note
shall bear interest from the next preceding May 1 or November 1 to which
interest has been paid or duly provided for or, if no interest has been
paid or duly provided for on these Notes, from May 1, 1998. The interest
so payable on any May 1 or November 1 will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid to the
person in whose name this Note is registered at the close of business on
the April 15 or October 15, as the case may be, next preceding such May 1
or November 1, whether or not such day is a Business Day.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually
signed by the Trustee under the Indenture referred to on the reverse
hereof.
20
<PAGE>
IN WITNESS WHEREOF, TYSON FOODS, INC. has caused this instrument to be
signed manually or by facsimile by its duly authorized officers.
Dated: May 1, 1998
TYSON FOODS, INC.
By: ______________________________
By: ______________________________
Attest:
________________________
21
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: May 1, 1998 THE CHASE MANHATTAN BANK,
as Trustee
By: ______________________________
Authorized Signatory
22
<PAGE>
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (hereinafter called
the "Securities") of the series hereinafter specified, all issued or to be
issued under and pursuant to an indenture dated as of June 1, 1995 (herein
called the "Indenture"), duly executed and delivered by the Company to The
Chase Manhattan Bank, as Trustee (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made
for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of
the Securities. The Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at different rates,
may be subject to different redemption provisions (if any) may be subject
to different sinking, purchase or analogous funds (if any) and may
otherwise vary as in the Indenture provided. This Note is one of a series
designated as the 7.00% Notes due May 1, 2018 of the Company, limited in
aggregate principal amount to $240,000,000.
Interest will be computed on the basis of a 360-day year of 12 30-day
months. The Company shall pay interest on overdue principal and, to the
extent lawful, on overdue installments of interest at the rate per annum
borne by this Note. If a payment date is not a Business Day as defined in
the Indenture at a place of payment, payment may be made at that place on
the next succeeding day that is a Business Day, and no interest shall
accrue for the intervening period.
In case an Event of Default with respect to the 7.00% Notes due May 1,
2018, as defined in the Indenture, shall have occurred and be continuing,
the principal hereof may be declared, and upon such declaration shall
become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions which provide that without prior
notice to any Holders, the Company and the Trustee may amend the Indenture
and the Securities of any series with the written consent of the Holders of
a majority in principal amount of the outstanding Securities of all series
affected by such supplemental indenture (all such series voting as one
class), and the Holders of a majority in principal amount of the
outstanding Securities of all series affected thereby (all such series
voting as one class) by written notice to the Trustee may waive future
compliance by the Company with any provision of the Indenture or the
Securities of such series; provided that without the consent of each Holder
of the Securities of each series affected thereby, an amendment or waiver,
including a waiver of past defaults, may not: (i) extend the stated
maturity of the principal of, or any sinking fund obligation or any
installment of interest on, such Holder's Security, or reduce the principal
amount thereof or the rate of interest thereon (including any amount in
respect of original issue discount), or any premium payable with respect
thereto, or adversely affect the rights of such Holder under any mandatory
repurchase provision or any right of repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Security of such series or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
stated maturity thereof (or, in the case of redemption, on or after the
redemption date or, in the case of mandatory repurchase, the date
23
<PAGE>
therefor); (ii) reduce the percentage in principal amount of outstanding
Securities of such series the consent of whose Holders is required for any
such supplemental indenture, for any waiver of compliance with certain
provisions of the Indenture or certain Defaults and their consequences
provided for in the Indenture; (iii) waive a Default in the payment of
principal of or interest on any Security of such series; (iv) cause any
Security of such series to be subordinated in right of payment to any
obligation of the Company; or (v) modify any of the provisions of the
Indenture governing supplemental indentures with the consent of
Securityholders except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security of any
series affected thereby.
It is also provided in the Indenture that, subject to certain
conditions, the Holders of at least a majority in principal amount of the
outstanding Securities of the series affected (all such series voting as a
single class), by notice to the Trustee, may waive an existing Default or
Event of Default with respect to the Securities of such series and its
consequences, except a Default in the payment of principal of or interest
on any Security or in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the Holder of
each outstanding Security affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default with respect to the
Securities of such series arising therefrom shall be deemed to have been
cured, for every purpose of the Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
The Indenture provides that a series of Securities may include one or
more tranches (each a "tranche") of Securities, including Securities issued
in a periodic offering. The Securities of different tranches may have one
or more different terms, including authentication dates and public offering
prices, but all the Securities within each such tranche shall have
identical terms, including authentication date and public offering price.
Notwithstanding any other provision of the Indenture, subject to certain
exceptions, with respect to sections of the Indenture concerning the
execution, authentication and terms of the Securities, redemption of the
Securities, Events of Default of the Securities, defeasance of the
Securities and amendment of the Indenture, if any series of Securities
includes more than one tranche, all provisions of such sections applicable
to any series of Securities shall be deemed equally applicable to each
tranche of any series of Securities in the same manner as though originally
designated a series unless otherwise provided with respect to such series
or tranche pursuant to a board resolution or a supplemental indenture
establishing such series or tranche.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Note in the manner, at the place, at the respective times,
at the rate and in the coin or currency herein prescribed.
The Notes are issuable initially only in registered form without
coupons in denominations of $1,000 and any multiple of $1,000 at the office
or agency of the Company in The City of New York, and in the manner and
subject to the limitations provided in the Indenture, but without the
payment of any service charge, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
24
<PAGE>
This Note will not be redeemable prior to maturity.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in The City of New York, a new Note or
Notes of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company, the Trustee and any authorized agent of the Company or
the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Company or the Trustee or any authorized agent of the
Company or the Trustee), for the purpose of receiving payment of, or on
account of, the principal hereof and premium, if any, and, subject to the
provisions on the face hereof, interest hereon, and for all other purposes,
and neither the Company nor the Trustee nor any authorized agent of the
Company or the Trustee shall be affected by any notice to the contrary.
No recourse under or upon any obligation, covenant or agreement of the
Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present, or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, under any rule of law, statute or constitutional provision or
by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and
released by the acceptance hereof and as part of the consideration for the
issue hereof.
Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.
25
<PAGE>
CUSIP: 902494 AF0
No. 2 $40,000,000
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the
Company or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
TYSON FOODS, INC.
7.00% Note due May 1, 2018
TYSON FOODS, INC., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Cede & Co. or registered
assigns, at the office or agency of the Company in The City of New York,
New York, the principal sum of $40,000,000 on May 1, 2018, in the coin or
currency of the United States, and to pay interest, semi-annually on May
1 and November 1 of each year, commencing November 1, 1998, on said
principal sum at said office or agency, in like coin or currency, at the
rate per annum specified in the title of this Note, from the May 1 or the
November 1, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date hereof
is a date to which interest has been paid or duly provided for, in which
case from the date of this Note, or unless no interest has been paid or
duly provided for on this Note, in which case from May 1, 1998, until
payment of said principal sum has been made or duly provided for; provided,
that payment of interest may be made at the option of the Company by check
mailed to the address of the person entitled thereto as such address shall
appear on the Security Register of the Company or by wire transfer as
provided in the Indenture. Notwithstanding the foregoing, if the date
hereof is after the 15th day of April or October, as the case may be, and
before the following May 1 or November 1, this Note shall bear interest
from such May 1 or November 1; provided, that if the Company shall default
in the payment of interest due on such May 1 or November 1, then this Note
shall bear interest from the next preceding May 1 or November 1 to which
interest has been paid or duly provided for or, if no interest has been
paid or duly provided for on these Notes, from May 1, 1998. The interest
so payable on any May 1 or November 1 will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid to the
person in whose name this Note is registered at the close of business on
the April 15 or October 15, as the case may be, next preceding such May 1
or November 1, whether or not such day is a Business Day.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually
signed by the Trustee under the Indenture referred to on the reverse
hereof.
26
<PAGE>
IN WITNESS WHEREOF, TYSON FOODS, INC. has caused this instrument to be
signed manually or by facsimile by its duly authorized officers.
Dated: May 1, 1998
TYSON FOODS, INC.
By: ______________________________
By: ______________________________
Attest:
________________________
27
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: May 1, 1998 THE CHASE MANHATTAN BANK,
as Trustee
By: ______________________________
Authorized Signatory
28
<PAGE>
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (hereinafter called
the "Securities") of the series hereinafter specified, all issued or to be
issued under and pursuant to an indenture dated as of June 1, 1995 (herein
called the "Indenture"), duly executed and delivered by the Company to The
Chase Manhattan Bank, as Trustee (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made
for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of
the Securities. The Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at different rates,
may be subject to different redemption provisions (if any) may be subject
to different sinking, purchase or analogous funds (if any) and may
otherwise vary as in the Indenture provided. This Note is one of a series
designated as the 7.00% Notes due May 1, 2018 of the Company, limited in
aggregate principal amount to $240,000,000.
Interest will be computed on the basis of a 360-day year of 12 30-day
months. The Company shall pay interest on overdue principal and, to the
extent lawful, on overdue installments of interest at the rate per annum
borne by this Note. If a payment date is not a Business Day as defined in
the Indenture at a place of payment, payment may be made at that place on
the next succeeding day that is a Business Day, and no interest shall
accrue for the intervening period.
In case an Event of Default with respect to the 7.00% Notes due May 1,
2018, as defined in the Indenture, shall have occurred and be continuing,
the principal hereof may be declared, and upon such declaration shall
become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions which provide that without prior
notice to any Holders, the Company and the Trustee may amend the Indenture
and the Securities of any series with the written consent of the Holders of
a majority in principal amount of the outstanding Securities of all series
affected by such supplemental indenture (all such series voting as one
class), and the Holders of a majority in principal amount of the
outstanding Securities of all series affected thereby (all such series
voting as one class) by written notice to the Trustee may waive future
compliance by the Company with any provision of the Indenture or the
Securities of such series; provided that without the consent of each Holder
of the Securities of each series affected thereby, an amendment or waiver,
including a waiver of past defaults, may not: (i) extend the stated
maturity of the principal of, or any sinking fund obligation or any
installment of interest on, such Holder's Security, or reduce the principal
amount thereof or the rate of interest thereon (including any amount in
respect of original issue discount), or any premium payable with respect
thereto, or adversely affect the rights of such Holder under any mandatory
repurchase provision or any right of repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Security of such series or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
stated maturity thereof (or, in the case of redemption, on or after the
redemption date or, in the case of mandatory repurchase, the date
29
<PAGE>
therefor); (ii) reduce the percentage in principal amount of outstanding
Securities of such series the consent of whose Holders is required for any
such supplemental indenture, for any waiver of compliance with certain
provisions of the Indenture or certain Defaults and their consequences
provided for in the Indenture; (iii) waive a Default in the payment of
principal of or interest on any Security of such series; (iv) cause any
Security of such series to be subordinated in right of payment to any
obligation of the Company; or (v) modify any of the provisions of the
Indenture governing supplemental indentures with the consent of
Securityholders except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security of any
series affected thereby.
It is also provided in the Indenture that, subject to certain
conditions, the Holders of at least a majority in principal amount of the
outstanding Securities of the series affected (all such series voting as a
single class), by notice to the Trustee, may waive an existing Default or
Event of Default with respect to the Securities of such series and its
consequences, except a Default in the payment of principal of or interest
on any Security or in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the Holder of
each outstanding Security affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default with respect to the
Securities of such series arising therefrom shall be deemed to have been
cured, for every purpose of the Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
The Indenture provides that a series of Securities may include one or
more tranches (each a "tranche") of Securities, including Securities issued
in a periodic offering. The Securities of different tranches may have one
or more different terms, including authentication dates and public offering
prices, but all the Securities within each such tranche shall have
identical terms, including authentication date and public offering price.
Notwithstanding any other provision of the Indenture, subject to certain
exceptions, with respect to sections of the Indenture concerning the
execution, authentication and terms of the Securities, redemption of the
Securities, Events of Default of the Securities, defeasance of the
Securities and amendment of the Indenture, if any series of Securities
includes more than one tranche, all provisions of such sections applicable
to any series of Securities shall be deemed equally applicable to each
tranche of any series of Securities in the same manner as though originally
designated a series unless otherwise provided with respect to such series
or tranche pursuant to a board resolution or a supplemental indenture
establishing such series or tranche.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Note in the manner, at the place, at the respective times,
at the rate and in the coin or currency herein prescribed.
The Notes are issuable initially only in registered form without
coupons in denominations of $1,000 and any multiple of $1,000 at the office
or agency of the Company in The City of New York, and in the manner and
subject to the limitations provided in the Indenture, but without the
payment of any service charge, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
30
<PAGE>
This Note will not be redeemable prior to maturity.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in The City of New York, a new Note or
Notes of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company, the Trustee and any authorized agent of the Company or
the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Company or the Trustee or any authorized agent of the
Company or the Trustee), for the purpose of receiving payment of, or on
account of, the principal hereof and premium, if any, and, subject to the
provisions on the face hereof, interest hereon, and for all other purposes,
and neither the Company nor the Trustee nor any authorized agent of the
Company or the Trustee shall be affected by any notice to the contrary.
No recourse under or upon any obligation, covenant or agreement of the
Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present, or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, under any rule of law, statute or constitutional provision or
by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and
released by the acceptance hereof and as part of the consideration for the
issue hereof.
Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.
31
<PAGE>
Exhibit 12
Tyson Foods, Inc.
Ratio of Earnings to Fixed Charges
March 28, 1998
(Dollars in millions)
1998 1997
Fixed Charges:
Interest Expense 65.2 55.1
Interest Income 5.8 3.7
Interest Capitalized 1.0 1.8
Interest Allocated to Beef and Pork 0.0 0.9
Amortization of Debt Discount 0.5 2.2
Interest Portion of Rental Expense (33%) 5.1 5.7
----- -----
Total Fixed Charges (A) 77.6 69.4
Earnings:
Net Income(Loss) 68.2 92.8
Provision for Income Taxes 40.0 89.3
Fixed Charges 77.6 69.4
Less Capitalized Interest (1.0) (1.8)
----- -----
Earnings and Fixed Charges (B) 184.9 249.7
Ratio of Earnings to Fixed Charges (B/A) 2.38 3.60
For purposes of computing the above ratios of earnings to
fixed charges, "earnings" consist of income from
continuing operations before income taxes and fixed
charges (excluding capitalized interest). "Fixed charges"
consist of (i) interest on indebtedness, whether expensed
or capitalized, but excluding interest to fifty-percent
owned subsidiaries (ii) the Company's proportionate share
of interest of fifty-percent owned subsidiaries, (iii)
that portion of rental expense the Company believes to be
representative of interest (one-third of rental expense)
and (iv) amortization of debt discount and expense.
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 28, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-3-1998
<PERIOD-END> MAR-28-1998
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 770
<ALLOWANCES> 0
<INVENTORY> 1,152
<CURRENT-ASSETS> 2,135
<PP&E> 3,728
<DEPRECIATION> 1,339
<TOTAL-ASSETS> 5,795
<CURRENT-LIABILITIES> 924
<BONDS> 2,250
0
0
<COMMON> 24
<OTHER-SE> 2,010
<TOTAL-LIABILITY-AND-EQUITY> 5,795
<SALES> 3,392
<TOTAL-REVENUES> 3,392
<CGS> 2,862
<TOTAL-COSTS> 2,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 108
<INCOME-TAX> 40
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> DEC-28-1996
<CASH> 116
<SECURITIES> 0
<RECEIVABLES> 495
<ALLOWANCES> 0
<INVENTORY> 989
<CURRENT-ASSETS> 1,644
<PP&E> 3,001
<DEPRECIATION> 1,144
<TOTAL-ASSETS> 4,364
<CURRENT-LIABILITIES> 571
<BONDS> 1,699
0
0
<COMMON> 15
<OTHER-SE> 1,568
<TOTAL-LIABILITY-AND-EQUITY> 4,364
<SALES> 1,528
<TOTAL-REVENUES> 1,528
<CGS> 1,279
<TOTAL-COSTS> 1,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 106
<INCOME-TAX> 61
<INCOME-CONTINUING> 45
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 29, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 508
<ALLOWANCES> 0
<INVENTORY> 1,035
<CURRENT-ASSETS> 1,695
<PP&E> 3,064
<DEPRECIATION> 1,186
<TOTAL-ASSETS> 4,461
<CURRENT-LIABILITIES> 604
<BONDS> 1,751
0
0
<COMMON> 22
<OTHER-SE> 1,681
<TOTAL-LIABILITY-AND-EQUITY> 4,461
<SALES> 3,102
<TOTAL-REVENUES> 3,102
<CGS> 2,592
<TOTAL-COSTS> 2,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 182
<INCOME-TAX> 89
<INCOME-CONTINUING> 93
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 28, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 38
<SECURITIES> 0
<RECEIVABLES> 539
<ALLOWANCES> 0
<INVENTORY> 1,000
<CURRENT-ASSETS> 1,619
<PP&E> 3,134
<DEPRECIATION> 1,223
<TOTAL-ASSETS> 4,420
<CURRENT-LIABILITIES> 706
<BONDS> 1,589
0
0
<COMMON> 22
<OTHER-SE> 1,603
<TOTAL-LIABILITY-AND-EQUITY> 4,420
<SALES> 4,693
<TOTAL-REVENUES> 4,693
<CGS> 3,915
<TOTAL-COSTS> 3,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 254
<INCOME-TAX> 116
<INCOME-CONTINUING> 138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.63
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FISCAL 1997 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 24
<SECURITIES> 0
<RECEIVABLES> 618
<ALLOWANCES> 0
<INVENTORY> 886
<CURRENT-ASSETS> 1,573
<PP&E> 3,163
<DEPRECIATION> 1,238
<TOTAL-ASSETS> 4,411
<CURRENT-LIABILITIES> 721
<BONDS> 1,558
0
0
<COMMON> 22
<OTHER-SE> 1,600
<TOTAL-LIABILITY-AND-EQUITY> 4,411
<SALES> 6,356
<TOTAL-REVENUES> 6,356
<CGS> 5,318
<TOTAL-COSTS> 5,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 330
<INCOME-TAX> 144
<INCOME-CONTINUING> 186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.85
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FISCAL 1996 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 547
<ALLOWANCES> 0
<INVENTORY> 1,027
<CURRENT-ASSETS> 1,810
<PP&E> 2,978
<DEPRECIATION> 1,109
<TOTAL-ASSETS> 4,544
<CURRENT-LIABILITIES> 686
<BONDS> 1,806
0
0
<COMMON> 15
<OTHER-SE> 1,527
<TOTAL-LIABILITY-AND-EQUITY> 4,544
<SALES> 6,454
<TOTAL-REVENUES> 6,454
<CGS> 5,506
<TOTAL-COSTS> 5,506
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 133
<INCOME-TAX> 49
<INCOME-CONTINUING> 87
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
